Technology for Managing Vacant REO
The REO problem sweeping America is now a full-scale epidemic and cities across the country are looking for ways to hold foreclosing lenders’ corporate feet to the fire to take care of the vacant properties they now own.
There aren’t enough property managers out there to remedy the problem of overseeing all the empty houses, with potentially over two million REOs waiting to happen, and cities, quick to realize the dangers, are developing huge penalties for properties left unattended. How huge? The Wall Street Journal reported on the trend not long ago and found that municipalities from Rhode Island to California are looking to fine lenders up to $1,000 per day for properties that are insufficiently maintained. It’s a case of adding insult to injury, because lenders, servicers and investors are already suffering financially on REOs, especially in urban neighborhoods. Vagrants look for dark properties and take up residence as squatters. Drug dealers use them as transaction sites and labs. Thieves strip them of valuable metals, right down to ripping open the walls in order to get to the copper plumbing.
Destruction is rampant and even a broken window can lead to all kinds of problems, from structural damage resulting from leaks to liability suits from invaders who become injured. If power is turned off, squatters often start fires, even if a fireplace is not available, and if a gas leak is present, disaster can be the result.
Apart from physical damage to individual properties, vacant and deteriorating properties have devastating effects on neighborhoods. Well-maintained properties take enormous value hits, sometimes leading to more foreclosures, families suffer and entire neighborhoods can be lost for years in the downward spiral of neglect. Home inspection services are growing in popularity, as are private security services, but as soon as the cat leaves, the mice come out once more to play their destructive games, and little is accomplished.
Like more and more solutions to thorny problems these days, technology is stepping up to fill the void left by the absence of human beings. Human intervention in almost anything is simply too expensive to maintain over a long period of time, including watching over a vacant property. A simple device, wireless and autonomous, is quickly becoming an attractive alternative for property managers trying desperately to monitor the swelling number of properties under their care. It is the RMD, for “remote monitoring device,” and it is precisely what the doctor ordered to address the growing threat of foreclosed and abandoned homes.
The RMD is a small battery-powered piece of technology that is unobtrusively installed in one or more rooms inside the property. It has the ability to sense gas leaks, drastic changes in temperature or humidity, such as those caused by a fire, a broken window or a plumbing leak. The RMD also “talks” wirelessly to window and door opening sensors, water/flood sensors, smoke alarms, if present in the property, and perhaps best of all has an embedded motion sensing camera to snap photos of all who visit, authorized or not. If a sensor detects something amiss, or if the motion-triggered camera is activated, an alert is sent automatically to the property manager or their designee that attention is required. Each RMD is programmed to “check-in” each 24 hours even if no alarms have been triggered. The information provided by the device is transmitted wirelessly and posted to a dashboard on a dedicated website, enabling property managers and owners of these assets to log in to review what if anything is happening in the homes under their care.
When authorized visitors show up to repair, maintain or view the home while house hunting, the device will also send those images, keeping interested stakeholders apprised of market activity in the home. When care is needed immediately, say to repel squatters or repair a leaking roof, the REO manager can deploy the right people for the right job. It’s not unknown for contractors to walk in on “bandos,” as unauthorized residents of abandoned properties are sometimes called, and find themselves under assault. With an RMD, an intrusion can be dealt with immediately by the appropriate authorities, with property damage and vandalism minimized by virtue of the early action taken.
RMDs have been piloted in cities across America and the initial responses have been highly favorable. Overwhelmed property managers finally have a tool that can help them keep an effective eye on the properties under their care without spending unworkable amounts of the owner/servicer’s money. Lenders and servicers have complete access to the software dashboard via the Internet, which helps them evaluate not only the properties they are managing, but also the managers on whom they rely. REO managers can spend more time on the properties that require more attention and use fewer inspectors, security people and other assets where they are less needed.
The devices are very independent, relying on their providers for battery changes and the occasional repairs, as needed. They are rented, not purchased by property managers, minimizing the upfront investment required. A modest monthly monitoring fee covers a full array of valuable services, including providing peace of mind for the people who fret about vacant properties for a living. The devices are also smart — and kept that way in a rapidly moving state of the art. Like most technologies, they are improving quickly, with features being conceived and added on a regular basis. The best of the devices are modularly improvable, so upgrades can happen fairly easily. Multiple units can be placed in houses that will “talk” to each other, and future enhancements will include things like real-time full-motion cameras and thermal imaging, giving property managers the ability to observe activities in all parts of the house.
Two-way audio is also a possibility, along with abilities to tie in 24-hour security services monitoring, which is passive until a threat is manifested and the police or fire departments are summoned. Levels of service can be ordered, based on the neighborhood, so like the features of the devices themselves, the supporting services don’t have to be “one size fits all.” Most of the improvements are software driven, so it is anticipated that continuous improvement can be expected, since software tends to evolve quickly.
RMDs are hitting the market at just the right time, as the market’s real needs are being revealed through the experiences of lenders, servicers, investors and REO managers. At the same time, with the growing trend of local governments looking to penalize those who don’t control their REO properties, these remote devices have the potential to save lenders many more millions of dollars than originally anticipated — this time in fines. Rich Rollins, founder and chief executive officer of REO Sentinel and National Quick Sale, is a technologist and entrepreneur in the mortgage servicing industry.